Cemex starts debt renegotiation talks after failed bond sale

Cemex starts debt renegotiation talks after failed bond sale
Published: 10 March 2009

Cemex has started discussions with banks to renegotiate about US$14.5 billion of debt after a surge in borrowing costs forced it to shelve a bond sale, according to Bloomberg.

Monterrey, Mexico-based Cemex’s U.S. shares sank to a nine-year low after the company said it was “indefinitely postponing” a planned $500 million international bond sale. The cost of protecting the company’s debt against default jumped to the highest in at least three years today, according to CMA Datavision.

Cemex has struggled amid the global credit crisis to refinance short-term loans it took out to pay for the $14.2 billion purchase of Rinker Group Ltd. in 2007. The deepening recession in the U.S., the company’s largest market, is also eroding revenue. Sales dropped 23 percent to $4.47 billion in the fourth quarter, led by a 32 percent plunge in U.S. sales.

The company put the $500 million bond sale on hold after a tumble in global financial markets last week added to the increase in its borrowing costs, said a person familiar with the offering who declined to be identified because he’s not authorized to speak publicly. In January, the company reached an agreement with bank creditors to extend maturities on $4 billion of loans.Cemex in a Feb. 4 meeting with analysts said the average interest rate on its debt was 5.5 percent and that 66 percent of that debt is denominated in dollars. At the end of December, Cemex had $18.8 billion of total debt and net debt, which is debt less cash, of $17.9 billion. Before the purchase of Rinker in July 2007, Cemex had net debt of about $4 billion.

Cemex said today in a statement that it intends to meet all its obligations while it renegotiates the debt. Completion of the renegotiation may require consent from all lenders, the company said. It reiterated that it’s also considering the sale of assets in an effort to “quickly achieve maximum financial flexibility.”